Few tenants carry stronger credit than the United States government, and that strength has made government-leased real estate a sought-after property type inside Delaware Statutory Trusts (DSTs) used for 1031 exchanges. A government-leased — often called a GSA — DST holds one or more buildings leased to a federal agency, typically through the General Services Administration (the federal government's real estate arm) or directly to a government agency. The draw is tenant credit: rent is ultimately backed by the U.S. government, which makes the income stream exceptionally reliable and the default risk very low. As a DST, the fractional beneficial interests qualify as like-kind real property for a 1031 exchange (under IRS Revenue Ruling 2004-86), so an exchanger can defer capital-gains tax while owning passive, high-credit real estate. But government leases have their own quirks — they're often long yet can include early-termination rights, and the government can vacate or relocate at lease end — so renewal and continuation risk is real. This guide explains how GSA-leased DSTs work, the government's tenant credit, lease terms and renewal risk, the income stability they offer, and how to evaluate a GSA DST. Note that demand and return statements are general and non-promissory, distributions are never guaranteed, and Baker 1031 does not provide tax or legal advice.
How GSA-Leased DSTs Work
A GSA-leased DST works like other DSTs in structure, but the tenant is what sets it apart. The DST holds a building (or several) that is leased to a federal government agency, often arranged through the General Services Administration — the agency that procures and manages real estate for the federal government. The agency occupies the space (a field office, courthouse, lab, processing center, or similar use), and pays rent under a government lease, which the DST distributes to investors after expenses. Investors own fractional beneficial interests in the trust, just as in any DST.
Because the property is leased to the government, the income is ultimately backed by the full faith and credit of the United States (for federal leases), giving it a tenant-credit profile that private tenants rarely match. The GSA typically structures leases to fit a specific agency's mission and space needs, and the building is often built or fitted out for that agency's use. As a 1031-eligible DST under Revenue Ruling 2004-86, a government-leased DST lets an exchanger reinvest sale proceeds into high-credit, passive real estate while deferring capital-gains tax — and, if the DST is leveraged, replace relinquished-property debt with non-recourse financing.
So a GSA-leased DST holds real estate leased to a federal agency (often via the GSA), passing government-backed rent through to fractional investors. So understanding the structure frames the rest. How GSA-leased DSTs work — a DST holding a building leased to a federal agency (frequently arranged through the General Services Administration) that occupies the space for a government use and pays rent ultimately backed by the U.S. government, with investors owning 1031-eligible fractional interests — combines a high-credit tenant with the DST's tax-deferral and passive-ownership features. The government tenant is the defining trait. Understanding the structure frames the credit and risk discussion. A GSA-leased DST holds real estate leased to a U.S. government agency (often through the GSA), passing government-backed rent to fractional, 1031-eligible investors in a passive structure.
Government Tenant Credit
The central appeal of a government-leased DST is the tenant's credit. When the tenant is a federal agency, the rent obligation is ultimately backed by the U.S. government — the highest-credit payer in the market. Unlike a corporate tenant, which can suffer declining sales, restructuring, or bankruptcy, the federal government does not face default risk in the ordinary commercial sense. That makes the rental income exceptionally reliable for as long as the government occupies the space and the lease is in force, which is the foundation of the category's reputation for stability.
This high tenant credit translates into a low risk of the kind of tenant default that drives losses in private-tenant real estate. A government agency is highly unlikely to simply stop paying rent on an in-force lease, so the day-to-day income risk is very low compared with a single corporate tenant whose fortunes can change. That credit strength is why government-leased properties are often prized by income-oriented investors and why they can support relatively low, stable returns: investors accept a modest yield in exchange for the security of a government-backed income stream. So the government's credit is the defining advantage of the category.
So government tenant credit — rent backed by the U.S. government — gives GSA-leased DSTs an exceptionally reliable income stream with very low default risk. So this credit strength is the core of the investment case. Government tenant credit — the rent on a federally leased property ultimately being backed by the full faith and credit of the United States, the highest-credit payer, with none of the default, restructuring, or bankruptcy risk a corporate tenant carries — gives GSA-leased DSTs exceptionally reliable income and very low tenant-default risk. That credit is why investors accept modest, stable returns. Understanding the credit strength explains the category's appeal. Government tenant credit, with rent ultimately backed by the U.S. government, gives GSA-leased DSTs an exceptionally reliable, low-default income stream — the core of the category's appeal.
The U.S. government is about as creditworthy a tenant as exists — it doesn't go bankrupt or miss rent on an in-force lease — which is precisely why investors accept a modest yield for the security it provides.
Lease Terms & Renewal Risk
Government leases have distinctive terms, and understanding them is essential. Federal leases are often long in stated length, but many include a 'firm term' (a non-cancelable period) followed by a 'soft term' during which the government may have the right to terminate early with notice. So the full stated lease term isn't always fully committed — the firm term is what's truly locked in, and the soft term carries early-termination risk. This is a key difference from a typical corporate net lease, where the full term is usually binding.
The bigger consideration is renewal and continuation risk. At lease end, the government is not obligated to renew — it can vacate the space, relocate to a different building, or consolidate offices, leaving the DST's property empty and the income interrupted. Government space decisions can be driven by budgets, mission changes, or facility consolidations outside the landlord's control. So while the government is an extremely reliable payer during the lease, it may not stay beyond the committed term. The result is that renewal/continuation risk — not default risk — is the main risk in a government-leased property.
So lease terms and renewal risk center on firm-versus-soft terms and the government's freedom to vacate at lease end, making continuation (not default) the key risk. So understanding the lease is crucial. Lease terms and renewal risk — federal leases often having a firm (non-cancelable) term followed by a soft term with early-termination rights, and the government being free to vacate, relocate, or consolidate at lease end (driven by budgets or mission changes) — make renewal and continuation risk, rather than default risk, the central concern in a GSA-leased DST. The committed term matters more than the stated term. Understanding the lease drives the evaluation. In GSA-leased DSTs, leases often pair a firm term with a soft, early-terminable term, and the government can vacate at lease end — so renewal and continuation risk, not default, is the main risk.
Income Stability
The combination of a high-credit tenant and a structured lease gives government-leased DSTs a reputation for income stability — within the committed lease term. While the government occupies the space under an in-force lease, the rent is highly dependable: the payer doesn't default, and the income arrives reliably, which is exactly what income-focused investors and 1031 exchangers seeking a steady passive return often want. That dependable, government-backed cash flow is the practical payoff of the tenant's credit.
But income stability is bounded by the lease. The reliability applies to the period the government is committed and occupying; beyond the firm term — and especially at lease end — the income depends on the government renewing or staying. If the agency vacates, the DST faces a vacancy and must re-lease the space (which may be specialized for government use and harder to backfill) or sell, interrupting the income. So income stability in a GSA-leased DST is strong during the lease and uncertain at its edges. As with all DSTs, distributions are projected, not guaranteed, and the property is illiquid.
So income stability is strong while the government is committed and occupying, but bounded by the firm term and renewal risk at lease end. So this bounded stability defines the income profile. Income stability — government-leased DSTs offering highly dependable, government-backed rent during the committed lease term (the practical payoff of the tenant's credit), but with that stability bounded by the firm term and by renewal risk at lease end, when a vacancy could interrupt income and specialized space may be hard to backfill — is strong but not unconditional. The income is reliable within the lease, uncertain at its edges. Understanding the bounded stability sets realistic expectations. Government-leased DSTs offer highly dependable income while the government is committed and occupying, but that stability is bounded by the firm term and renewal risk, and distributions remain projected, not guaranteed.
- A GSA-leased DST holds real estate leased to a federal agency (often via the General Services Administration), with rent ultimately backed by the U.S. government.
- Government tenant credit gives the income stream very low default risk — the core appeal of the category.
- Federal leases often pair a firm (non-cancelable) term with a soft, early-terminable term, so renewal and continuation risk — not default — is the main risk.
- Evaluate the lease terms (firm vs. soft), the agency's mission-criticality of the space, renewal likelihood, and the location before investing.
Evaluating a GSA DST
Evaluating a government-leased DST starts with the lease. Because the government is a reliable payer but a discretionary stayer, the lease structure is decisive: how long is the firm (non-cancelable) term, how much soft term carries early-termination rights, and what is the remaining committed term? A property with a long firm term left provides far more income certainty than one near the end of its committed period. Read the termination, renewal, and escalation provisions carefully — they define both the income and the risk.
Next, assess renewal likelihood, which often turns on how 'mission-critical' the space is to the agency. Purpose-built facilities — a courthouse, a specialized lab, a secure processing center, or space the agency has heavily invested in fitting out — are stickier and more likely to be renewed than generic office space the agency could easily leave. Consider the agency's function, how essential the location is to its mission, and whether the space would be hard or expensive to relocate. Then evaluate location (for re-leasing or sale if the government leaves), and the DST structure itself — the sponsor, fees, projected hold and distributions (never guaranteed), and any non-recourse debt.
So evaluating a GSA DST means analyzing the lease (firm vs. soft term), the agency's mission-criticality, renewal likelihood, location, and the DST structure. So a disciplined evaluation weighs credit against continuation risk. Evaluating a GSA DST — analyzing the lease (the firm versus soft term, remaining committed term, and termination, renewal, and escalation provisions), the agency's mission-criticality of the space (purpose-built, hard-to-relocate facilities being stickier), the renewal likelihood, the location (for backfill or sale), and the DST structure (sponsor, fees, hold, distributions, and debt) — weighs the government's strong credit against its renewal and continuation risk. The committed lease term and mission-criticality drive the case. Understanding how to evaluate the offering completes the picture. Evaluate a GSA DST by analyzing the lease (firm vs. soft term), the agency's mission-criticality, renewal likelihood, location, and the DST's sponsor, fees, hold, and debt — none of which guarantee the projected income.
With a government tenant, the question isn't whether the rent gets paid — it's whether the agency stays. Mission-critical, purpose-built space and a long firm term are what turn high credit into durable income.
GSA DSTs in a 1031 Exchange
Government-leased DSTs are typically used as replacement property in a 1031 exchange, and how they fit the exchange mechanics is part of their appeal. After selling appreciated investment real estate, a 1031 exchanger has 45 days to identify replacements and 180 days to close, using a qualified intermediary. A GSA DST can be identified and closed quickly because it's a pre-packaged, already-acquired property, which is useful for exchangers under time pressure or seeking a reliable identification to anchor their 45-day list with a high-credit, government-backed property.
Within the exchange, a government-leased DST also helps satisfy the requirements to replace both value and debt. A leveraged GSA DST can replace a relinquished property's mortgage through its non-recourse financing, helping the investor fully defer tax; a debt-free GSA DST works when there's no debt to replace, without creating mortgage boot. Because the income is government-backed and relatively stable, many exchangers use a GSA DST as the lower-volatility, credit-quality 'anchor' of a diversified replacement portfolio, pairing it with DSTs in other sectors to balance the renewal risk that government leases carry against the tenant-credit risk of other property types.
So GSA DSTs fit a 1031 exchange as fast-closing, value- and debt-replacing replacement property that can anchor a diversified, credit-quality exchange portfolio. So understanding the exchange fit completes the picture. GSA DSTs in a 1031 exchange — serving as pre-packaged replacement property that closes quickly within the 45- and 180-day deadlines, replacing both value and (with leverage) debt, and anchoring a diversified replacement portfolio with high-credit, government-backed income that balances other sectors' risks — fit a deferral-focused exchange well, with their renewal risk weighed against their credit strength. They combine speed, debt replacement, and credit quality. Understanding the exchange fit rounds out the analysis. GSA DSTs work in a 1031 exchange as fast-closing replacement property that meets the value- and debt-replacement requirements and can anchor a diversified, high-credit exchange portfolio.
How Baker 1031 Helps You Evaluate GSA DSTs
Baker 1031 Investments helps investors understand and evaluate government-leased (GSA) DSTs — how GSA-leased DSTs work, the strength of government tenant credit, lease terms and renewal risk, the income stability they offer, and how to evaluate a specific offering — so you can decide whether a GSA DST fits your 1031 exchange and your goals, and access suitable offerings when appropriate.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. We help you analyze the lease (the firm versus soft term and the remaining committed period), the agency's mission-criticality of the space, the renewal likelihood, the location, and the DST itself (sponsor track record, fees, projected hold, debt, and distributions), so you can weigh a government-leased DST against other replacement options for your exchange. Baker 1031 does not provide tax or legal advice — your CPA and attorney handle your specific 1031 and tax situation, which can be technical and time-sensitive given the 45- and 180-day deadlines. Demand and return characteristics we discuss are general, not promises; distributions and returns are never guaranteed, the property is illiquid, and past performance does not guarantee future results. Our role is to help you evaluate government-leased DSTs clearly and invest only when suitable for your goals and risk tolerance.
Frequently Asked Questions
What is a government-leased (GSA) DST?
A government-leased — often called a GSA — DST is a Delaware Statutory Trust that holds one or more buildings leased to a U.S. government agency, typically arranged through the General Services Administration (the federal government's real estate arm) or leased directly to a federal agency. The agency occupies the space for a government use — a field office, courthouse, laboratory, or processing center, for example — and pays rent under a government lease, which the DST distributes to investors after expenses. Investors own fractional beneficial interests in the trust, which are treated as like-kind real property for a 1031 exchange under IRS Revenue Ruling 2004-86, so an exchanger can defer capital-gains tax while owning passive, high-credit real estate. The appeal is the tenant's credit: rent is ultimately backed by the U.S. government, giving the income very low default risk. So a GSA DST gives 1031 investors fractional, passive ownership of government-leased real estate, pairing strong tenant credit with the tax-deferral and passive-ownership features of a DST.
What is the GSA?
The GSA — General Services Administration — is the federal agency that procures, leases, and manages real estate and other resources for the United States government. When a federal agency needs office, court, lab, or other space, the GSA often handles the real estate transaction, including leasing buildings from private owners on the government's behalf. In the context of DSTs, a 'GSA-leased' or 'government-leased' property is one where the tenant is a federal agency and the lease runs through (or is administered by) the GSA, so the rent obligation is ultimately backed by the federal government. The GSA's involvement is why these properties are described as having a government tenant with government-backed credit. Some government-leased properties involve state or local agencies rather than the federal GSA, and those carry the credit of the relevant government rather than the U.S. government specifically. So when evaluating a 'GSA DST,' confirm exactly which government entity is the tenant and whether the lease is federal — since that determines the credit behind the rent.
Why is government tenant credit so strong?
Government tenant credit is strong because, for a federal lease, the rent obligation is ultimately backed by the full faith and credit of the United States — the highest-credit payer in the market. Unlike a corporate tenant, which can experience declining sales, restructuring, or bankruptcy, the federal government does not face default risk in the ordinary commercial sense, so it is extremely unlikely to simply stop paying rent on an in-force lease. That makes the rental income exceptionally reliable for as long as the government occupies the space and the lease is in force. This credit strength is the central appeal of government-leased DSTs: investors gain an income stream with very low tenant-default risk, which is why these properties are prized by income-oriented investors and why they often carry modest, stable returns. So government tenant credit removes much of the tenant-default risk that drives losses in private-tenant real estate — though, importantly, it doesn't remove the risk that the government chooses not to renew when the lease ends.
What is renewal risk in a GSA DST?
Renewal risk is the risk that the government tenant does not renew its lease and vacates the space when the lease ends. Unlike default risk — which is very low for a government tenant — renewal risk is the main risk in a government-leased property. At lease expiration, the government is not obligated to stay: it can vacate, relocate to a different building, or consolidate offices, leaving the DST's property empty and interrupting the income. Government space decisions can be driven by budgets, mission changes, or facility consolidations that are outside the landlord's control. Compounding this, government-leased space is sometimes purpose-built or specialized, which can make it harder and more expensive to re-lease to a new tenant if the government leaves. So while a government tenant is an extremely reliable payer during the lease, it may not stay beyond its committed term — making renewal and continuation risk the central concern. When evaluating a GSA DST, focus on the remaining committed term and the likelihood the agency renews.
Are GSA DSTs 1031-eligible?
Yes — government-leased (GSA) DSTs are 1031-eligible. The fractional beneficial interests an investor holds in a Delaware Statutory Trust are treated as direct interests in like-kind real property under IRS Revenue Ruling 2004-86, so they qualify as replacement property in a 1031 exchange. This lets an investor who has sold appreciated investment real estate reinvest the proceeds into a government-leased DST and defer the capital-gains (and depreciation-recapture) tax they would otherwise owe, while moving into passive, high-credit ownership. If the DST is leveraged, its non-recourse financing can also replace debt from the relinquished property, helping an exchanger who had a mortgage meet the requirement to replace value and debt. To preserve deferral, the exchange must follow the 1031 rules and timelines — identifying replacements within 45 days and closing within 180 days — using a qualified intermediary. So a GSA DST is a 1031-eligible, passive replacement option that pairs deferral with strong tenant credit. Baker 1031 doesn't provide tax advice; confirm the specifics with your tax advisor, since the rules are technical.
What is a firm term versus a soft term in a government lease?
A government lease often distinguishes between a firm term and a soft term. The firm term is the non-cancelable period during which the government is committed to the lease and cannot terminate early — this is the portion of the lease that is truly locked in and provides reliable income. The soft term is a later period during which the government may have the right to terminate the lease early, typically with advance notice. So a lease with, say, a long stated total term may have only part of that term firm, with the rest soft and subject to early termination at the government's option. This matters because the committed (firm) term — not the full stated term — is what's genuinely secure; the soft term carries early-termination risk that a typical corporate net lease usually doesn't. When evaluating a GSA DST, look closely at how much firm term remains, since that's the period of most certain income. A property with a long remaining firm term offers more income certainty than one whose firm term is nearly over and that is running on soft, terminable years.
What does 'mission-critical' space mean and why does it matter?
'Mission-critical' refers to how essential a particular space is to the function of the agency occupying it. Some government space is purpose-built or specialized — a courthouse, a secure facility, a laboratory, a data or processing center, or space the agency has heavily invested in fitting out for its specific needs. Other space is more generic, like standard office space the agency could relocate from relatively easily. Mission-criticality matters because it strongly influences renewal likelihood: an agency is far more likely to stay in (and renew) space that is hard or expensive to replicate, central to its operations, or tied to a location it must serve, than in generic space it could leave. So a more mission-critical, purpose-built property generally carries lower renewal risk — the government has more reason to stay. When evaluating a GSA DST, assessing how mission-critical the space is to the agency's function is one of the most important judgments, because it helps you gauge the likelihood the high-credit tenant actually continues occupying the building beyond its committed term.
How stable is the income from a government-leased DST?
Income from a government-leased DST is highly stable during the committed lease term, but bounded by it. While the government occupies the space under an in-force lease, the rent is exceptionally dependable — the payer doesn't default, and the income arrives reliably, which is exactly what income-focused investors and 1031 exchangers seeking steady passive returns often want. That dependable, government-backed cash flow is the practical payoff of the tenant's strong credit. However, the stability applies to the period the government is committed and occupying. Beyond the firm term — and especially at lease end — the income depends on the government renewing or staying. If the agency vacates, the DST faces a vacancy and must re-lease (potentially specialized) space or sell, interrupting income. And like all DSTs, distributions are projected, not guaranteed, and the property is illiquid. So government-leased DST income is strong and reliable within the lease, but uncertain at its edges. Judge stability by the remaining committed term and renewal likelihood, not by the stated term alone.
How long do GSA DSTs typically last?
Like most DSTs, government-leased DSTs typically have a projected hold of roughly five to seven years, though the actual period depends on the sponsor's business plan, the lease structure, and market conditions. During the hold, the DST owns the building, collects the government-backed rent, and distributes the net income to investors (distributions are projected, not guaranteed). At the end of the hold, the sponsor generally sells the property, and investors receive their share of the proceeds — at which point a 1031 investor can exchange again into another DST or other like-kind property to keep deferring tax, or cash out and recognize the gain. One nuance specific to government-leased DSTs: the lease's firm and soft terms and the timing of renewal decisions can interact with the hold, since the property's value and salability are affected by how much committed lease term remains at sale. Because a DST is illiquid with little or no secondary market, plan to remain invested for the full hold. So expect a multi-year commitment, commonly around five to seven years, and confirm the projected hold and how it relates to the lease in the offering documents.
Are distributions from a GSA DST guaranteed?
No — distributions from a government-leased DST are not guaranteed. The DST distributes the net rental income the property generates after expenses and debt service, and that income depends on the government continuing to occupy the space and pay rent under an in-force lease. During the committed lease term, the government's strong credit makes that income highly reliable — but it isn't a contractual guarantee to investors, and several things can interrupt it: the government could exercise an early-termination right in the soft term, decline to renew at lease end and vacate, or the DST could face higher expenses or, if leveraged, debt-service pressures. If the government leaves, the property could sit vacant while it's re-leased or sold, reducing or suspending distributions. Any projected distribution rate in the offering materials is an estimate based on assumptions, not a promise, and past performance does not guarantee future results. DSTs are also illiquid, so you can't simply exit if income disappoints. So treat the projected income as reliable but not guaranteed, and weigh the renewal risk that bounds it.
How does a GSA DST compare to a corporate net-lease DST?
The main difference is the trade-off between credit and term certainty. A corporate net-lease (NNN) DST holds property leased to a corporate tenant (such as a pharmacy or retailer) on a long lease where the tenant typically pays taxes, insurance, and maintenance — the full lease term is usually firmly binding, but the tenant carries corporate credit that can deteriorate, with default or bankruptcy a real risk. A government-leased DST has the opposite profile: the tenant's credit is exceptionally strong (government-backed, very low default risk), but the lease may include soft, early-terminable years and the government can decline to renew, so renewal and continuation risk is higher than with a binding corporate net lease. So a GSA DST trades some term certainty for far stronger tenant credit, while a corporate NNN DST trades weaker (corporate) credit for a more firmly committed term. Neither is universally better — it depends on whether you prioritize credit strength (GSA) or contractual term certainty (corporate NNN), and on the specifics of each lease. Evaluate both the credit and the committed term in any offering.
Who can invest in a government-leased DST?
Government-leased DSTs, like other DSTs, are securities offered under Regulation D to accredited investors, so you generally must meet the accredited-investor standard to invest. Accredited status is typically based on income (over $200,000 individually, or $300,000 jointly, in each of the past two years with the expectation of the same) or net worth (over $1 million excluding your primary residence), among other qualifying criteria. Beyond meeting the accredited threshold, you invest through a broker-dealer, and a suitability review considers your financial situation, goals, liquidity needs, and risk tolerance to confirm that an illiquid, longer-term DST is appropriate for you. DST interests aren't sold on an exchange or to the general public — they're private placements with minimums and a subscription process. So to invest in a government-leased DST you generally need to be an accredited investor and complete a suitability review through a broker-dealer. Confirm your accredited status and discuss suitability before committing, since DSTs are illiquid and meant to be held for the full term.
Does a government-leased DST use debt?
It depends on the specific offering — some government-leased DSTs are leveraged and some are all-cash (debt-free). A leveraged DST carries non-recourse mortgage debt on the property, which lets it replace the debt from an exchanger's relinquished property (important for a 1031 investor who had a mortgage and must replace that debt to fully defer tax), and leverage can amplify both returns and risk. A debt-free government-leased DST owns the building with no mortgage, avoiding refinancing and interest-rate risk and offering a lower-risk profile, but it doesn't replace any relinquished-property debt and may offer more modest returns. The stable, government-backed income of these properties can make them suitable for either approach, but the right one depends on your exchange: if you're replacing debt, you generally need a leveraged DST; if you have no debt to replace (or want lower risk), a debt-free DST may fit. So check whether a given government-leased DST is leveraged or debt-free and match it to your debt-replacement needs and risk tolerance. The offering documents disclose the debt structure and terms.
Can the government just leave the building?
Yes — at the end of the committed lease term, and sometimes earlier during a soft term, the government can leave the building. This is the defining risk of government-leased real estate. Unlike its very low default risk, the government's freedom to vacate, relocate, or consolidate at lease end is real: space decisions can be driven by budget constraints, changes in an agency's mission, or government-wide facility consolidations, none of which the landlord controls. Many federal leases also include a soft term during which the government can terminate early with notice, so even before the stated end date the income may not be fully committed. If the government leaves, the DST's property can sit vacant — and because government space is sometimes specialized or purpose-built, it may be harder and costlier to re-lease to a new tenant. So while the government won't default during the lease, it can certainly leave when its commitment ends. That's why evaluating the firm term, renewal likelihood, mission-criticality, and the building's backfill potential is so important in a GSA DST.
How does Baker 1031 help me evaluate GSA DSTs?
We help investors understand and evaluate government-leased (GSA) DSTs — how GSA-leased DSTs work, the strength of government tenant credit, lease terms and renewal risk, the income stability they offer, and how to evaluate a specific offering — so you can decide whether one fits your 1031 exchange and goals. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. We help you analyze the lease (the firm versus soft term and remaining committed period), the agency's mission-criticality, the renewal likelihood, the location, and the DST itself (sponsor, fees, projected hold, debt, and distributions). Baker 1031 does not provide tax or legal advice — your CPA and attorney handle your specific 1031 and tax situation, including the 45- and 180-day deadlines. Demand and return characteristics we discuss are general, not promises; distributions are never guaranteed, the property is illiquid, and past performance doesn't guarantee future results. Our role is to help you evaluate government-leased DSTs clearly and invest only when suitable for your goals and risk tolerance.
Glossary
- Government-Leased (GSA) DST
- A DST holding real estate leased to a U.S. government agency.
- General Services Administration (GSA)
- The federal agency that leases and manages government real estate.
- Government Tenant Credit
- Rent ultimately backed by the U.S. government's full faith and credit.
- Firm Term
- The non-cancelable period of a government lease.
- Soft Term
- A later lease period the government may terminate early.
- Renewal Risk
- The risk the government won't renew and vacates at lease end.
- Mission-Critical Space
- Space essential to an agency that is likely to be renewed.
- Early-Termination Right
- A government option to end a lease before its stated term.
- Backfill
- Re-leasing space to a new tenant if the government leaves.
- Income Stability
- Reliable rent during the committed lease term.
- Committed Term
- The remaining firm period the tenant is bound to.
- Delaware Statutory Trust (DST)
- A trust holding real estate in 1031-eligible fractional interests.
- Rev. Rul. 2004-86
- The IRS ruling treating DST interests as like-kind real property.
- Accredited Investor
- An investor meeting income/net-worth thresholds for Reg D offerings.
- Suitability Review
- The broker-dealer's check that a DST fits the investor.
- Non-Recourse Debt
- DST mortgage debt that replaces a 1031 investor's relinquished debt.
Sources & References
- IRS. Revenue Ruling 2004-86 (Delaware Statutory Trusts)
- Cornell Legal Information Institute. 26 U.S. Code § 1031 — Exchange of real property held for productive use or investment
- IRS. Like-Kind Exchanges — Real Estate Tax Tips
- FINRA. Real Estate Investments
Disclosures
This article is published by Baker 1031 Investments, LLC for general educational purposes for accredited investors and is not an offer to sell or a solicitation of an offer to buy any security, nor is it tax, legal, accounting, or investment advice or a recommendation. Any securities offering is made solely through a sponsor’s private placement memorandum (PPM) following a suitability determination. Securities offered through Aurora Securities, Inc. (ASI), member FINRA / SIPC; Baker 1031 Investments is independent of ASI.
Oil & gas mineral and royalty interests and DST programs are speculative, illiquid securities sold only to verified accredited investors and involve substantial risk, including possible loss of principal, commodity-price and production-decline risk, lack of control, and the risk that an intended 1031 exchange fails to qualify for tax deferral. Whether a particular interest qualifies as like-kind real property is a fact-specific legal determination that varies by state and by the terms of the instrument. Tax results depend on your individual circumstances. Consult your own CPA and attorney before acting. Past performance does not guarantee future results.
